DiamondRock Hospitality pany(DRH) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q4 2022, comparable hotel adjusted EBITDA was $77 million, an increase of 121.9% or$ 175.7 million over 2021, surpassing pre-pandemic 2019 levels by $11.2 million or 17% [125][128] - Total comparable revenues for the company were$ 257 million in the quarter, an increase of nearly 23% over the comparable period in 2021 [127] - Comparable RevPAR for the portfolio in Q4 was $196, which is 6.7% higher than 2019, driven by room rates over 19% above 2019 [127][128] Business Line Data and Key Metrics Changes - Leisure revenues were up 26% in Q4 compared to 2019, with a 29% increase in average daily rates [118] - Group revenues in Q4 were nearly 103% of the same period in 2019, with group room rates up nearly 13% [130] - Resort performance showed total RevPAR up nearly 29% over the same period in 2019, driven by a greater than 40% increase in room rates [108] Market Data and Key Metrics Changes - Urban hotels' RevPAR reached 97.5% of 2019 levels, outperforming expectations [108] - Demand in the Florida Keys remains strong, with rates 50% higher than in 2019, contributing to high profit margins [21][108] - The company expects robust growth in Q1 from resorts in Vail, Huntington Beach, and Sonoma, with total Q1 RevPAR anticipated to be up double digits compared to 2019 [20][37] Company Strategy and Development Direction - The company aims to capitalize on acquisition opportunities in a challenging debt market for private equity firms, focusing on high-quality, value-add opportunities [4] - A strategic focus on ROI projects has been emphasized, with completed upgrades to four hotels producing$ 15.5 million more profit than in 2019 [131] - The company is positioned to benefit from a balanced portfolio of leisure, group, and business demand segments, with a projected earnings mix of 60% from urban markets and over 40% from resort markets in 2023 [126] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in closing the occupancy gap to 2019 levels, particularly in urban hotels, with significant momentum expected in 2023 [120] - The company anticipates some challenges to profit growth margins due to rising property taxes, insurance costs, and staffing wages, but remains optimistic about travel demand [134] - The outlook for 2023 is constructive, with expectations for record comparable total revenues and hotel adjusted EBITDA [119][134] Other Important Information - The company repurchased 1.6 million shares at an average price of $7.81 per share during Q4 [105] - The company has nearly$ 600 million in liquidity, providing a balance sheet advantage for opportunistic capital allocation [126] - The company was named the hotel sector leader in the Americas by GRESB for the third consecutive year, with new environmental and social targets set for 2030 [112] Q&A Session Summary Question: What gives confidence in closing the occupancy gap to 2019? - Management indicated that the majority of gains are expected in occupancy, particularly at urban hotels, with January showing a 15.8% increase compared to last year [120] Question: How are leisure rates being underwritten for 2023? - The approach to underwriting leisure rates is market-specific, with expectations of strong performance in key markets like Vail and Sonoma [140] Question: What are the expectations for margins in 2023? - Management expects high single-digit expense increases, indicating that flat GOP margins would be considered a success [24][146]